When I conduct legal due diligence on a target company in M&A deals, certain issues keep appearing. They slow down the process, sometimes affect valuation, and always create unnecessary friction.

1. Contracts

I often see contracts signed by founders in their personal capacity, or by other companies they own, when the contracts should have been entered into by the target company.

Unstamped contracts are another recurring problem. Buyers may insist these be rectified before closing, which means late-stamping penalties and delays.

With the Stamp Duty Audit Framework introduced by the Inland Revenue Board of Malaysia, buyers are even less willing to take the risk of acquiring a company that has legacy unstamped contracts.

2. Resolutions

Contracts entered into without proper board or shareholder approval come up frequently. These corporate formalities are not just “tick-box” exercises. Missing approvals can render contracts, and the underlying transactions open to challenge.

 3. Statutory Contributions

Non-compliance with statutory contributions such as EPF and SOCSO is another common finding. It raises governance concerns and takes time to fix, which inevitably delays the deal.

4. Related-Party Transactions

A director who has an interest in contracts entered by the target company is required under the Companies Act 2016 to disclose that interest. Failure to do so is one of the most common non-compliances I encounter.

Not only does this make the contracts potentially voidable, it also raises questions about governance standards.

These are recurring issues I frequently encounter in due diligence exercise. For founders who plan to sell one day, getting these areas right from the beginning avoids a lot of cleaning up later. This is exactly the work I help founders with – making sure the company is exit-ready before buyers come in.

#MalaysianCorporateLawyer

This post was first posted on LinkedIn on 29 August 2025.